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A Look at the Development of China's Renewable Energy Sector

A Look at the Development of China's Renewable Energy Sector

When it comes to massive renewable energy adoption, China is an icon of promise.

Being the world’s largest energy producer and consumer, the Asian country is now realizing that coal will no longer serve its economic development. Hence, renewable energy is a necessity for the nation’s inclusive growth and energy security, suggested a report by Solidiance, an Asia-Pacific marketing strategy firm.

Renewable energy take up across the country is driven by three key factors – the increasing demand for electricity, the need to cut dependence on coal and the need to cut greenhouse gas emissions.
According to Pilar Dieter, Principal for Solidiance, these three are interrelated.

 “While China seeks to cut greenhouse gas as part of its energy savings plan, this ideally should ease China's reliance on fossil fuels and... save more electricity,” she told EcoSeed.

Looking forward, the Central Government, under its 12th Five-Year Plan (2011-2015) for National Economic and Social Development, has imposed self-mandated greener energy targets. By 2015, it aims to increase its renewables capacity by 11.4 percent, reduce emissions by 17 percent per unit of gross domestic product, and reduce energy consumption per unit of G.D.P. by 16 percent.

Solidiance identified four key renewable energy sectors that will see the achievement of these goals: hydropower, wind, solar photovoltaic, and biofuels. However, these sectors are currently in different stages of development, facing challenges that have to be overcome in able to optimize their full potential.

Hydropower

China’s hydropower sector is its most well-developed renewable energy source, accounting for 20 percent of the country’s power generating capacity in 2010 and 22 percent of the global capacity in 2011.

China is home to the world’s largest hydropower station, the Three Gorges Dam spanning the Yangtze River. Completed in July 2012, it is capable of producing as much as 22.5 gigawatts of clean power.

By 2015, China intends to produce 325 GW from its hydropower sector and 430 GW in 2020, up from an original target of 380 GW.

Ms. Dieter said the sector’s impressive growth is because of the government’s keen interest and strong influence, with 10 state-owned enterprises dominating the construction and operation of hydropower projects.

Domestic private companies also take on hydropower but they are quite small in number and their installed capacity is just less than a hundred thousand megawatts, she noted. The biggest privately-owned hydro station in China only has a maximum capacity of 24,000 MW.

While foreign firms also invest in the sector, Solidiance noted in their report that their capacity is largely limited to a supporting role as the government firmly controls the development of this “carefully crafted” sector.

Related article: Talking Turkey: What About Renewables?

Over the next seven years, Solidiance said growth in investment for hydropower is anticipated, but after 2020, a decline is mostly likely to occur where investment will be lower and available capacity will be limited. This trend is mainly due to concerns associated with hydropower development, such as long development periods, social displacement and environmental impacts.

“It’s not going away. The decline simply means other technologies, like wind and solar, have started to take up the attention of these alternative energy manufacturers or producers,” stressed Ms. Dieter. “As the Chinese government is set to care more about sustainable development, hydropower will continue to grow as it used to.”

Wind power

China’s second most reliable renewable energy source is wind. It is now the country’s third largest energy source, surpassing nuclear with 15.9 GW new installations last year, according to recent figures from Bloomberg Energy Finance.

Bloomberg also placed China as the established global leader in wind industry for four consecutive years.

Despite the growth of the wind industry, it is experiencing slowdown as it approach maturity stage.
In 2012, annual installations fell by 18 percent from 2011’s record of 19.3 GW and new financial investment dropped by 12 percent to $27 billion.

Solidiance said in order to pass up slowdown, regulations and grid connectivity have to be improved.
According to Ms. Dieter, state regulations need to be improved because “people never really stop to think if this is really the way that China's going to continue to focus to renewables.”

She mentioned that there are local Chinese manufacturers who are losing money as they invest in massive wind projects, believing on the huge promise that the wind industry is going to take off.

Additionally, the allocation of subsidies and funds to spur the production of wind technology is toward Chinese producers. “The government funds were very targeted, as in the case of most industries in China, to local manufacturers, but they weren't discouraging foreign investment, they just wanted to make sure it isn’t a foreigner's industry in China.”

In terms of grid connectivity, Ms. Dieter said the main concerns are the quality of wind power and the cooperation of grid operators. Thirty percent of wind power in China is not connected to the grid while grid-connected electricity suffers from curtailment and transmission problems.

Ms. Dieter noted that the Chinese government is currently working on the regulation of roles of the different parties in order to enhance not just the connectivity, but as well as the way in which finances are being allocated.

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Within the next three years, China aims to have 100 GW wind capacity, of which 5 GW will be coming from offshore installations.

Solar P.V.

Solar power in China, according to Solidiance, is entering development stage.

While the market is not as big as those in the European countries, it is rapidly with the country setting a a goal to put up 21 GW of solar photovoltaic installations by 2015.

This ambitious target reflects the China’s confidence that its solar industry is ready for growth and suitable destination for investment, stated the report.

However, the solar power is being confronted with challenges like serious overcapacity and profit reduction.

Ms. Dieter said the Chinese government is allotting funds for consolidation as well as considering the idea of promoting mergers and acquisitions strategy to address the impacts of these challenges in the sector.

The government also starts looking at how to smartly combine P.V. power with building construction and integrated applications like power generation, heating and cooling.

“China is trying to boost the internal demand for the solar through these kinds of policies,” said Ms. Dieter.

China is the fastest growing solar P.V. market worldwide, increasing threefold in 2011 alone. It is now a multi-gigawatt market, with more than 2 GW new installations in 2011. With the government’s eagerness to promote solar P.V., China’s cumulative capacity is expected to maintain an upward path over the coming years notwithstanding the barriers in the sector.

Biomass and biofuels

Biomass and biofuels represent the youngest renewable energy sector in China, with prospects in second generation biofuels, ethanol and energy from feedstocks.

“Despite their future potential, it is important to recognize that these areas are just getting started in China and currently have very poor supporting infrastructures,” stated the report.

Ms. Dieter said there China is eyeing specific provinces for pilot biofuel projects, which if successful, could be replicated by other provinces.

Of biofuel sources, the report noted that second generation biofuels or energy generated from non-food sources would provide China with extreme benefits.

China is now exploring the potential of the use of jet fuel to create a national source of price-stable biofuels to cut the impact of external geopolitical situations, which could affect fuel security.

Citing information from Civil Aviation Administration, Solidiance said the China is expected to consume 12 million metric tons of aviation biofuels by 2020, equivalent to 30 percent of the country’s overall use of jet fuel.

“Although these areas remain underdeveloped in China, compared to solar, wind or hydro technologies, biomass and biofuels could be described as the next generation of renewable energies in China and are the key growth markets to watch over the course of the 12th and 13th Five Year Planning periods,” stressed Solidiance.

By. Catherine Dominguez




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Leave a comment
  • FullPicture on February 15 2013 said:
    This article says only the half truth. China is a thief and is stealing water by diverting it illegally and building dams on the rivers flowing to downstream riparian states. Also most of these are on Tibet which it has occupied illegally.
  • BerlinFan on February 15 2013 said:
    FullPicture, China's diversion of water is not entirely diplomatic, but it is something the Chinese must do to meet their future water needs. I suggests you take a more wholistic approach in analyzing China's crimes. Furthermore, the portrayal of the Chinese "occupation" of Tibet has been heavily biased by western media. Tibet is very much an autonomous state. Although it lacks full government independence, many of the decisions that truly affect day to day life are made by local officials.
    I plead with you to learn more about China, as I have (I am a German National).
    China does have its crimes, do not get me wrong, but there is much more to the country than what is said about it in western media.

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